The Attorney General of the Federation and Minister for Justice, Abubakar Malami along with Prof. Jummai Audi, the Chairman of the Nigerian Law Reform Commission, have acknowledged that there are deficiencies in the Capital Gains Tax Act that need rectifying.
They made these remarks at a workshop on the Reform of Tax Laws held in Abuja.
Audi defined capital gains tax as a levy on individuals and businesses when they profit from the sale of capital assets, including machinery, land, buildings, business goodwill, and shares.
According to her, the Act has several issues, such as failing to detail how to compute the chargeable gain and a broad exemption of entities and transactions from the tax, which could encourage tax avoidance.
Audi highlighted some of the Commission’s proposed changes, including amending certain sections to clarify conflicting due dates for filing capital gains, increasing the capital gains return rate, and making capital losses deductible while computing capital gains.
Furthermore, she suggested that the current 10 per cent tax rate should be increased, considering the law’s importance as a government revenue source.
Representing Malami, Mrs Ifunanya Nwajagu, Director of the Legal Drafting Department at the Federal Ministry of Justice, stated that the Finance Acts of 2020 and 2021 had brought the Capital Gains Tax Act up to date with the economic situation.
Still, she conceded there were additional defects in the Act that the Commission was currently examining for further enhancements.
Malami shared his concern over these flaws, stating, “the broad and wide exemption in the Act provide an opportunity for tax avoidance, the low percentage of tax chargeable on gains, lack of enforcement mechanism to ensure compliance with the Act and punishment for failure to comply.”
He concluded by praising the NLRC for their work in promoting legal reform for Nigeria’s economic and socio-political development.
